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Non-Competes – Who is Excluded in Georgia?

Posted by Benjamin I. Fink on January 12, 2018

What types of employees may be subjected to non-competes is one of the murkier issues under Georgia’s “new” non-compete law. While we still do not have any guidance from the Georgia appellate courts, the federal judges in Georgia have been active in addressing various issues under the “new” statute, including this issue. CSM Bakery Solutions v. Debus, 2017 WL 2903354 (N.D. Ga. Jan. 25, 2017) is one such decision.

CSM and Lawrence Foods are competing bakery manufacturers. Debus worked for CSM as a technical services sales representative (TSSR) and then a sales representative. She left CSM to work for Lawrence in a similar capacity.

Debus had signed an agreement containing a non-compete governed by the “new” law. Judge Timothy Batten initially issued a preliminary injunction enforcing the non-compete against Debus. After some discovery, Debus moved to dissolve the injunction. Judge Batten granted the motion finding that she did not fit within the category of employees for whom non-competes are permitted.

The decision contains an extensive discussion of Debus’ employment duties at CSM. Below is an outline of the issues raised in the case and how Judge Batten dealt with each one:

Debus’s employment with CSM

She was hired for her ability to make and decorate cakes.

She worked with CSM’s customer, Jewel.

As a TSSR —

She trained and assisted cake decorators on the decoration and display of cakes in Jewel stores.

She promoted new ideas for Jewel to use in designing and displaying cakes to customers.

She did not take orders or negotiate price with customer.

Promoted to sales representative.

She still had 2 supervisors on the Jewel account.

She still did not take orders or negotiate price.

CSM argues non-compete is enforceable under 13-8-53(a)(1) and (2).

Debus continuously and regularly solicited and/or made sales to Jewel.

Sales entail more than just placing or taking an order.

Includes process of convincing a customer to purchase new or larger quantities of products.

Self-evaluation – “aimed to bring more products into the territory that will be successful to [the] customers and benefit CSM.”

Court finds as follows:

This work was the job of everybody that works at CSM.

Does not show she was involved in sales, but that she, along with everyone else at CSM, worked to be quality employees for CSM.

Deposition testimony more persuasive than self-evaluation in which Debus had an incentive to cast her responsibilities in the most expansive light.

CSM argues Debus had the title of sales representative.

Court finds this is not sufficient to show she made or solicited sales.

Fact that title mentions involvement in sales, not conclusive that title reflected actual duties.

Supervisor testified that her role did not change when she was promoted from TSSR to sale rep.

As sales rep, she did not solicit customers.

CSM did not hire another TSSR after she was promoted to sales rep.

CSM argues that e-mails show she participated in sales.

E-mails with supervisor suggesting a cupcake promotion, making her supervisors aware of potential discounted products, asking about the potential role of key account manager, requesting a product’s price and providing her open “sales projects” on her last day.

Court finds these are not sufficient to demonstrate sales role.

CSM could only come up with 6 e-mails over last 5 years of employment.

Anyone involved in sales would be in frequent contact with customers.

E-mails show she had important role with products sold to customer, but also show she was a subordinate who sought permission from supervisors on matters of sales.

Supervisor testified she was not aware of Debus making sales.

CSM points to the resume Debus submitted to Lawrence Foods

“Key Skill: Bakery Product Sales”

Court finds this merely represents her interpretation of what skills and experience she had developed throughout her career.

Generic and generalized skills without substance elaborating.

Difficult to glean what she did at CSM just from a skill entitled “Bakery Product Sales.”

Drafted with hope of getting hired, so presumably erred on the side of overstating her skills and experience.

CSM argues she trained Jewel employees and bakery managers

How to decorate baked goods, how to present goods in stores and how to work with new products.

Attended seasonal sales meetings to present new products to Jewel.

CSM says this created ongoing relationship with Jewel.

Again, court finds this is not sufficient.

Role at seasonal meetings was only to help choose items to be presented and prepare items to be shown at the meetings.

Meetings with bakery managers only to show them products that would be available and how to best prepare them.

Any actual orders occurred during follow up by the account manager.

Court also notes there were no sales records, commission sheets for Debus

Lack of evidence one would expect if former employee regularly solicited customers or made sales.

Judge Batten finds that if Court interpreted statute in accordance with CSM’s reading, the statute would become meaningless because it would apply to every employee who positively impacts a company’s sales efforts.

CSM also argues 13-8-53(a)(3).

As sales rep, Debus managed 2 employees and had authority to hire/fire.

Debus described her role with CSM as managing a territory.

Court finds this is still not good enough

Primary duty with the company did not consist of managing the Jewel account.

She had 2 supervisors on the account.

Her conduct was managed by those supervisors.

Not the types of activities the legislature had in mind when requiring that the employee “[h]ave a primary duty of managing the enterprise…”

One last argument by CSM – Key Employee

Debus “gained a high level of notoriety, fame, reputation, or public persona as the employer’s representative or spokesperson or has gained a high level of notoriety, level of influence or credibility with the employer’s customers, vendors, or other business relationships…”

Resume shows her work allowed her to develop strong relationships with Jewel employees.

Held: While Jewel employees respected Debus, her role and status with the company do not indicate she was a key employee.

International business with thousands of employees worldwide.

Debus was one of the lower-ranking employees.

Legislature’s intent to limit the application of the statute to certain employees would be frustrated if the court agreed with CSM’s definition of “key employee” because virtually any employee with customer interaction could be covered.

There are several lessons that can be learned from this decision. First, judges in Georgia are still reluctant to enforce non-competes against employees in Georgia, especially when they are not high-level managers or executives. Second, merely being involved in sales may not always be sufficient to qualify as someone who can be subjected to a non-compete in Georgia. Before implementing non-competes for significant numbers of employees, employers should carefully consider each category of employees within the company and make a determination as to whether a non-compete is permissible as to that category of employee under the “new” law.

Authored By

Benjamin I. Fink Ben Fink, a shareholder in Berman Fink Van Horn P.C., concentrates his practice in business and employment litigation with a particular emphasis on non-compete, trade secret and other competition-related disputes.With...

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